The illusory divide

The illusory divide

The Qantas saga contains many lessons – about managing people, about brand management and, more fundamentally, about the nature of corporate identity.

Recent events suggest that Qantas has a very narrow view of what constitutes ‘the company’ – a view that encompasses the board and CEO, perhaps the top management team, the financial assets of the business represented by the balance sheet and probably the shareholders. The other key elements of the business – the staff, suppliers, the community generally, and perhaps even the Qantas and Jetstar brands themselves, seem to be viewed as resources that are outside the ‘system’, to be acquired, used and disposed of as appropriate in the pursuit of objectives.

The evidence for this assessment is not hard to find. In grounding the entire fleet without notice Qantas treated its staff and customers with a contempt that could only apply to ‘outsiders’. One of my American colleagues expressed it in an interesting way – in that act, Qantas gave all of its staff an ‘F’ – they were all forced to be part of a massive failure, notwithstanding their efforts on the company’s behalf over many years.

In advertisements over the weekend, Qantas also reveals how little it understands or appreciates its customers – the ads imply that the grounding was neither the fault nor the decision of the airline (‘We deeply regret the impact of our fleet being grounded’), offer schedule certainty now that the industrial action is over, and promise a special ‘thank you’ for those affected. Thank you for what? For being left stranded without notice on the other side of the world?

The former CEO of Qantas, Geoff Dixon, who laid the foundations for the current management philosophy, said in 2005 “I know some CEO’s say, look after your customers, look after your employees, and the returns for shareholders will follow. I do the exact opposite.” Dixon is being very clear here about what is inside ‘the system’ and what is outside.

Even the company’s brands, including its flagship Qantas brand, now seem to be part of a portfolio approach that includes Jetstar and the new Asian brand RedQ. Portfolio managers are typically not committed to any particular holding. In this context, brands are viewed dispassionately as vehicles for the acquisition of revenue.

Although its behaviour is extreme, Qantas is not alone in creating a divide that puts large elements of the total business system on the outside. During the GFC, many companies who had previously espoused a commitment to sustainability and to ‘caring’ values revealed how shallow these commitments were by dumping them in favour of short-term profitability. These responses reveal quite starkly what the essence, or essential core, of the business is assumed to be.

So, we are brought to a very interesting and critical question: how should a business think of itself? Should it embrace the very narrow financial or shareholder view witnessed by Qantas and others, or should it have a wider view of what is inside its system?

In 1963 the head of IBM, Tom Watson Jnr, published ‘A Business And its Beliefs’, in which he argued that IBM would still be IBM if it was stripped of everything except its beliefs and that ‘The only sacred cow in an organisation should be its basic philosophy of doing business.” Philosophy for Watson was synonymous with principles that, to have force, must also be faithfully carried out. IBM is an extraordinary case study in the execution of this idea, which has enabled it to successfully effect a fundamental transformation from mainframe computer supplier to information solutions provider.

This is one perspective on the question of corporate identity. It says that the essence of the business system is a set of beliefs, or principles, rather than a particular financial structure or set of numbers.

Another perspective is provided by the emerging idea of ‘shared value’ being promoted by Professor Michael Porter of Harvard. Here additional shareholder value is created by deliberately expanding the boundaries of the business system to include a lot of things that were previously viewed as externalities, including social and environmental impacts. Unquestionably, employees, customers and the community are very much part of the ‘system’ in the shared value model; they are seen as essential components of the moneymaking process rather than as external resources that lie on the other side of a divide.

These perspectives represent a more enlightened, and ultimately much more robust way of viewing the business than the two-dimensional ‘either-or’ way of businesses such as Qantas. They do not imply any lack of regard for money making as the ultimate purpose of the business. Rather, they conceive of the money making process as a common cause with many stakeholders. Win-win is the hallmark of this approach rather than win-lose.

Geoff Dixon and Alan Joyce have made the mistake of assuming that the pursuit of wealth for the shareholders has to be conceived narrowly and therefore achieved at the expense of employees and customers. What this reflects is lack of true leadership skills, particularly imagination.

Good business leaders today have a much more sophisticated and nuanced understanding of what constitutes the essential core of the business and therefore of corporate identity. They do not create a divide that externalises many of the true assets of the business and they don’t see any inconsistency between making money and stewardship. Rather, they have the abilities of a good orchestra conductor in bringing all the various elements of their business system together to create a virtuoso performance.

Christopher Tipler is a Melbourne-based management advisor and author of Corpus RIOS – The how and what of business strategy. His web site corpusrios.com contains more material on this and related topics.